The debate over debt pushdown mechanisms in secured financing of listed company acquisitions has been going on in Turkey since the late nineties. With increasing investment by foreign private equity funds, the scope of this debate is broader, and covers the use of a target company's assets for securing the financing of an acquisition. The CMB's approach to this structure is controversial. Recently, it had an unpleasant experience when a private equity fund backed out of a deal due to a lack of financing. According to public disclosures made by the target, a fund that had agreed to purchase the company's shares terminated its agreement with the sellers on the ground that it had financing-related problems caused by economic fluctuations. The CMB's position was that such problems would not have occurred had the financing not been secured by the target company's assets. Reportedly, this led to the CMB's position that investors who wish to acquire shares in Turkish companies should secure their own financing instead of relying on the target's assets as collateral. The reasoning is that the use of the assets puts the minority shareholders in a difficult position.
August 31 2007
